Loss Deduction Restrictions: When Losses Exceed the Subsistence Level

In a case before the Cologne Tax Court (Finanzgericht Köln, FG), a taxpayer brought an action after accumulating losses from so-called covered call writing transactions (Stillhaltergeschäfte). The offsetting of these losses was limited to corresponding gains from such transactions. As a result, the total amount of income increased. In its recent 2023 ruling, however, the FG held that even in such a case the taxable subsistence level in the amount of the basic personal allowance (Grundfreibetrag) must be taken into account, as otherwise undue hardship would arise. An appeal to the Federal Fiscal Court (Bundesfinanzhof) was admitted; non-recognised losses from capital investments should therefore be reviewed.